Burren rejects £1.5bn bid from oil major ENI

The soaring value of smaller exploration and production companies to the larger oil majors struggling to increase their production was underlined yesterday when London-based Burren Energy revealed it had rejected a number of hostile bids valuing it at more than £1.5bn.

Shares in the British firm soared 26% to £11.65 as the Italian oil group ENI confirmed it was one of those that had made an unsolicited approach to Burren, with which it shares operations in the Congo.

Burren, which is best known for its assets in Turkmenistan, said the conditional proposals were unacceptable as they fell short "by a significant margin" of recognising the value which the board believed was inherent in the group.

In an earlier statement, ENI had said it had put forward a £10.50 offer and continued to seek "limited due diligence from Burren, irrevocable undertakings from key shareholders and a recommendation from the board of Burren prior to making a formal offer to all shareholders".

The Italian firm, like Shell and BP, has been under pressure to find ways of growing its flagging oil and gas output at a time of very high crude prices. ENI said in July it was open to further acquisitions after a £6bn spending spree this year, although it talked then of oil sands and refining.

The partly state-owned group is caught up in a dispute with the government of Kazakhstan, which has accused it of moving too slowly - and running up too high costs - on the huge Kashagan field, which contains as much as 9bn barrels of oil.

Burren has been criticised by some in the City for being too focused on production and not being successful enough in its exploration. Its shares have underperformed peers such as the highly rated Tullow Oil and Soco International.

But the board said yesterday it was well positioned to deliver value for shareholders "through the implementation of its focused strategy of finding, acquiring, developing and exploiting oil and gas reserves in emerging markets".

Analysts at Dresdner Kleinwort believed no other major European or US companies would be in the frame for Burren. "There may be possible Asian interest but we think this deal, if it firms up, will remain between ENI and Burren. We think there is a fairly high chance that mutually acceptable terms can be found with a likely upper limit of £14, although £13 is more likely to be acceptable to ENI," they said.